WSLCB – Executive Management Team
(January 8, 2020)

Here are some observations from the Wednesday January 8th Washington State Liquor and Cannabis Board (WSLCB) Executive Management Team public meeting.

My top 3 takeaways:

  • Chris Thompson, WSLCB’s Director of Legislative Relations, brought the team up to speed on the agency’s proposed request legislation and two bills on vapor products.
    • Thompson’s last legislative briefing was to the agency’s Cannabis Advisory Council (CAC) in December
    • Thompson began by saying WSLCB still had not gotten approval from Governor Jay Inslee’s office and the Office of Financial Management (OFM) for the agency’s request legislation on medical cannabis/small producers and their proposed social equity program which were submitted for approval nearly four months ago on September 13th (audio – 8m).
      • The 2020 legislative session convened on January 13th and dozens of prefiled bills, several concerning cannabis, have started being scheduled for consideration in the House and Senate.
      • “Just a reminder, they’re both revised proposals from their initial form,” Thompson said. For the proposed social equity bill, municipalities which request additional retail locations would not be expected to “process or administer that, they just send it along to us and we handle all those administrative duties.” Revisions also “narrow the eligibility scope” for license qualification to “people from communities of color.”
      • For the medical cannabis/small producer proposal, Thompson told the group that changes since its initial submission included “removal of the shared retail space,” considered akin to a farmers market, due to unspecified “concerns.” If allowed by local zoning, qualifying licensees would be allowed to sell Department of Health (DOH) compliant medical cannabis products from their “production site, or processing site” or to “patients” and “caregivers” via delivery.
      • When asked about the proposed request legislation’s odds of obtaining sponsorship, Thompson responded “it doesn’t really impact our ability to get a sponsor” because WSLCB had “a couple of proposals that would generate revenue.” But he cautioned that the medical/small producers draft was “more uncertain” in terms of generating funds. Nonetheless, Thompson felt there might be “legislators that are way more interested in that than the Governor is.”
      • Considering the “fiscal issues related to” the proposed social equity program, Thompson said that “the governor’s budget funded the Department of Commerce for their administrative work but they didn’t put in their budget our needs for administration. The bill generates net revenue, on the plus side.” However, he claimed the OFM had “basically, a process concern” Thompson’s staff hadn’t known about when WSLCB submitted a fiscal note claiming “indeterminate in terms of revenue.” Instead, that office “wanted a specific number in the box.” Thompson reported WSLCB had subsequently provided OFM “revised” revenue information and he believed they would be “open to” signing off on the draft request “even though it’s not in the Governor’s budget.” Regarding the other proposal aiming to help patients and tier 1 growers, “we were informed that that would not be funded in the Governor’s budget.”
      • Board Member Ollie Garrett inquired about making further revisions to the social equity draft “if needed.” Thompson replied that because “the session starts Monday” any further changes to the proposal “should be done in committee, in the legislature.” He anticipated there were likely to be “lots of changes to the bill.” Garrett was interested in modifying language about “majority” ownership in a cannabis license. Director Rick Garza advised having Thompson draft amendments to present to lawmakers should the bill be approved and sponsored.
      • Board Member Russ Hauge asked “what does it mean that the Governor’s office has said they will not fund the small producers bill?” Thompson said his “sense” of the motivations of the Governor’s office were to “[start] from a very conservative standpoint fiscally, primarily because of [Initiative 976]”, Inslee’s directive around the budgeting of state agencies, and “a desire to back-fill a whole bunch of lost revenues.” He believed Inslee’s office was unlikely to find money for issues “outside of top priority items for the Governor.”
    • Thompson then provided significant details about two request bills on vapor products which had been predicted by the agency since Governor Inslee’s executive order on vaping in late September of 2019 (audio – 15m).
      • “Just 10 minutes ago,” Thompson said he’d gotten a draft from OCR of what would become a WSLCB agency request bill for tetrahydrocannabinol (THC) vapor products while a separate bill regulating non-THC vapor products would be an executive request filed by the Department of Health (DOH). Reminding everyone that the State Board of Health (SBOH) emergency ban on flavored products expired in February, he added that the request bills aimed to lay a “foundation when we move beyond the immediate, kind of, emergency phase of responding to the vapor associated lung injury (VALI) outbreak.
      • THC vapor products. Fairly simple little bill,” Thompson stated, saying it would offer further clarity to “regulatory authority [that’s] already there” for WSLCB to “prohibit an additive, an ingredient, a compound, a solvent, a- or even a device as part of a marijuana vapor product.” It would also feature a “green light” for licensees “to create and sell certain THC flavored vapor products.” He continued, saying some “natural flavors could be used. Synthetic flavors could not.” Thompson did allow that some aspects of the permitted substances “could be fleshed out” by agency rulemaking. If passed, the WSLCB bill would take immediate effect which would “authorize at least some of what’s going on or has been industry practice in the past in the cannabis world for vapor products.”
        • Director of Communications Brian Smith asked about the proposal’s definition around “natural flavors.” Thompson read from the proposal’s wording “if the characterizing flavor is derived from botanical terpenes naturally occurring in the cannabis plant and if the characterizing flavor mimics the terpene profile of what’s found in the cannabis plant.” Later, the bill specifies that this “does not include any synthetic terpenes.”
      • Non-THC vapor products. Thompson expected WSLCB would be “strong partners” with DOH in executing their request bill and had worked with the Governor’s office to develop the current draft. He explained its “key provisions” relating to WSLCB:
        • A new license to manufacture non-THC vapor products would be created and issued by WSLCB. There would be a prohibition on “retailing if you are a manufacturer.”
        • Hauge asked whether the intent of the request legislation was to ban importation, control out of state manufacturing, or for the agency to “police not just licensing but also the distribution.” Thompson answered they wouldn’t regulate in-state manufacturers selling outside of Washington, but would continue to be in charge of in-state retail. Out-of-state manufacturers would only be permitted to sell products to Washington vapor retail licensees after obtaining a WSLCB license. Enforcement Chief Justin Nordhorn likened the oversight of out-of-state manufacturers to how the agency already handled alcohol certificates of approval.
        • Thompson also confirmed the agency’s limited ability to “oversee compliance” or do enforcement of online vapor product sellers.
        • The DOH bill “retains a flavor ban” that Thompson predicted “is going to be pretty controversial” as it would be more restrictive than federal regulations.
      • Costs predicted for WSLCB’s work under these potential laws was “about $65,000” annually for THC vapor product oversight, and $81,000 during the first year and $44,000 in subsequent years for regulation of non-THC vapor products.
    • Thompson said “action at the federal level” on non-THC vapor products had elicited a “considerably more modest proposal in the end.”
      • The implications of federal changes were discussed by DOH staff updating the SBOH during that agency’s January 8th board meeting.
    • Thompson closed out by noting he was working with several legislators on “cannabis-related legislation.”
  • Participants at the most recent cannabis Regulators Roundtable in Maryland were invited to share their observations from the event.
    • Staff discussed the prior roundtable hosted in Alaska in August 2019.
    • Sara Cooley Broschart, WSLCB’s Public Health Education Liaison, talked about the public health emphasis of the roundtable (audio – 6m).
    • Kathy Hoffman, WSLCB’s Policy and Rules Coordinator for cannabis and vapor products, shared what was most notable for her (audio – 8m).
      • A panel on the future of medical cannabis stood out for Hoffman as she witnessed the engagement of doctors, pharmacists, as well as nurse practitioners in other states’ medical cannabis programs. She noted an emphasis in these programs on regulations requiring “standard formulations across products that are constantly available and consistent batch-by-batch so that they can confirm dosage.” This included “strong testing requirements and packaging and labeling requirements” as well as reviews of permitted additives, particularly when inhaled. Hoffman said these states tracked cannabis products through a prescription monitoring program (PMP), noting that Washington uses such a program “primarily” for opioids. Hoffman said some states offered patients economic assistance and their retail experience “looks like, almost like a pharmacy.” She also pointed out that Colorado’s medical cannabis delivery program had “just gone live” and that retail delivery would start on January 2nd, 2021.
      • A discussion on “product trends and claims” indicated “trends are changing rapidly” including the “route of administration” such as “nasal sprays.” Colorado’s Department of Revenue Marijuana Enforcement Division (MED) “audits the product to see if it meets certain criteria” and then places it in a “category of products.” Broschart noted that the body included health officials as well as “industry, medical professionals.” Hoffman explained the process was for cannabis products “they really don’t have enough science on yet,” so Colorado regulators “audited” the items rather than “approving” them. “There seems to be a gap in toxicological and epidemiological knowledge,” as well as consumer understanding, she noted.
      • The Canadian experience was the last topic Hoffman touched on, saying that the country’s representatives “provided us with, sort of where they are in their legalization process.” She noted variance in regulations between provinces and efforts to “[work] in the concerns of First Nations into their models.” Bruce Turcott, the Assistant Attorney General (AAG) for the WSLCB, noted that a Canadian official asked for a copy of one of Washington state’s tribal compacts on cannabis. “Also, the requirement that there’s plain packaging across all the provinces,” was of interest to Hoffman as well as a new “pesticide regime.” She was somewhat surprised by “very coordinated public health messaging” from the government for “why you should purchase product from [Canada’s retail stores] as opposed to the illicit market,” noting the contrast to Washington’s messaging.
    • Bruce Turcott enjoyed a “fireside chat” with former U.S. Deputy Attorney General James Cole and the “director of the Colorado agency [Jim Burack]” (audio – 4m).
      • Cole shared thoughts on the “development of the document” and “what he thinks should happen going forward” at the federal level. Turcott had “always wanted to know whether the Department of Justice reviewed Washington’s published rules” prior to issuing the Cole Memorandum. Cole confirmed to Turcott that “somebody had reviewed them.”
      • During an “attorney breakout session,” an aide to Congressman Earl Blumenauer teleconferenced about the congressman’s Cannabis Caucus whose meetings now saw up to “100 people” from across Capitol Hill participating to stay informed on federal bills like SAFE Banking, the STATES Act, and the MORE Act.
      • Turcott claimed Ontario “has similar experiences with medical dispensaries as Washington had.” The provincial government was “trying to get them to close down if they weren’t licensed” though many dispensaries remained open.
      • Turcott also found a social equity panel with participants from New York, Massachusetts, and Los Angeles of interest. Their talk hit on “some of the issues and problems, uncertainties and unknowns” which he felt “need to be addressed.”
    • Rick Garza, like Turcott, felt that hearing from Cole was the highlight of the event (audio – 9m).
      • Garza appreciated learning about Cole’s discussions “with White House senior staff and the President.” One of Cole’s contemporary concerns was that the “illicit market had persisted” instead of being “replaced” completely by legal systems. Garza, too, “found it quite interesting” that the unregulated cannabis market had “increased to some extent” in Washington and other places which legalized. Cole said cannabis potency was another area not addressed in his Memorandum which had since arisen as a concern which Garza shared.
      • Garza called Canada’s approach “a lot more conservative” and similar to that nation’s alcohol laws where “the province is the retailer.”
      • Garza was also intrigued by new medical cannabis states with systems that “looked like the medical program for other drugs.” He felt it was an “interesting evolution” as almost all states now had some kind of medical cannabis laws or were creating them.
      • Garza said the loosely affiliated regulators roundtable now had 20 states interested in forming “a cannabis regulators association.” He expected the group would seek 501(c)(6) exemption status and form bylaws at the next meeting in Portland around “late April or early May.” Garza expected the new organization would be “regulator only” with exceptions for state attorneys general or representatives from governors’ offices. The new organization would potentially become an “affiliate” of the Council of State Governments (CSG). He noted that Washington State Senator Sam Hunt was on CSG’s leadership team and had met with Board Chair Jane Rushford and him months earlier “to see if we were interested in helping bring regulators together with CSG.”
    • As the group turned to questions, Becky Smith, the agency’s Director of Licensing, brought up the “social equity piece” hoping to hear “if they discussed how things are going in other states” (audio – 6m).
      • Hoffman replied that she would “reach out” to other regulators to get feedback for Smith. Garrett noted that WSLCB was already familiar with some of the roundtable’s panelists such as Cat Packer, Director of the Department of Cannabis Regulation for the City of Los Angeles, and that staff should consider organizing a conference call on the topic. Broschart warned there were many “negative” results from states whose equity efforts up to that point “weren’t able to deliver.” Garza echoed that many communities and regulators were “frustrated” and no officials reported “grand” success with their programs. “A lot of it had to do with lack of financing,” he observed while noting that Policy Analyst and Tribal Liaison Brett Cain had already conducted significant research on the subject. Garrett felt learning from other states would help Washington “get ahead” in its equity efforts. Garza wondered if those backing social equity had over promised results. Cannabis Examiner Manager Kendra Hodgson and Garrett noted that the CAC advised not limiting efforts to issuing cannabis licenses but to support ancillary businesses as well.
  • Staff shared updates on cannabis testing laboratories, the traceability contract, and the Hillard Heintze report on the agency’s enforcement division.
    • Hodgson provided a quarterly laboratory update, explaining that “there’s not been a lot of large shifts, kind of, in our landscape of the labs” (audio – 7m).
      • Hodgson’s last quarterly lab update was in August 2019.
      • Washington still had 13 “core” labs all of which were accredited to test for potency, moisture, foreign matter, and microbiological screenings in accordance with WAC 314-55-102.
      • Five labs were accredited to test for pesticides and two were permitted to test for heavy metals.
      • Medicine Creek Analytics was the only entity certified for all three testing regimes. Hodgson noted they handled the “predominant volume” of heavy metals testing, but claimed it was a “small number” of overall tests.
      • Hodgson said that the Department of Ecology (DOE)’s Cannabis Science Task Force (CSTF) continued to work towards transfer of lab accreditation from WSLCB to DOE.
        • “The agencies and the labs have been putting in many, many hours” between the Steering Committee and work group meetings. She added that DOE “will be starting the drafting” of the task force’s first report which is due to the legislature in July.
        • Hodgson also reported that DOE wanted to convene leadership from the agencies involved in the CSTF to look at “long term roles and responsibilities” in enacting changes “sooner rather than later” when possible. Turcott said there had been discussion about that upcoming leadership meeting in a phone call with other AAGs from DOH, DOE, and the Washington State Department of Agriculture (WSDA). Hodgson shared her impression that “the sticky wicket is going to be rulemaking.”
        • See Cannabis Observer’s coverage of all of the CSTF Steering Committee meetings:
        • The next CSTF Steering Committee meeting is on January 17th.
      • Hauge asked about the interagency agreement for cannabis testing between WSDA and WSLCB, and Hodgson referred him to Enforcement Commander Jennifer Dzubay.
    • Deputy Director Megan Duffy provided an update on the latest contract amendment with traceability vendor MJ Freeway, which she last discussed on December 4th (audio – 3m).
      • WSLCB had “gone into subscription services” for Leaf Data Systems, meaning the agency didn’t “anticipate or plan any releases” though such releases were possible if WSLCB required them. The amendment was for six months “with four six-month options on top of that to ensure that we do not have the same situation the State encountered last time they switched systems.” WSLCB had also gotten a $265,000 credit back from MJ Freeway. The Traceability 2.0 Work Group of “external stakeholders” planned to meet on January 24th to continue vetting future possibilities for the state’s traceability needs.
      • Duffy noted the agency’s Systems Modernization Project (SMP) had been progressing with a “request for qualifications and quotes out” until January 24th and “negotiate a contract through the end of February” with a vendor to integrate Salesforce into the agency by March.
    • Garza briefly mentioned the report by Hillard Heintze which studied the practices of the agency’s Enforcement division (audio – 1m).
      • Amongst other agency and constituent engagements, Hillard Heintze hosted an Enforcement Discussion at Green River College in Auburn on July 30th. While originally planned for release between September and October, on October 8th staff confirmed the report had been delayed until the “end of December.”
      • At the EMT meeting, Garza said WSLCB would be “sharing our response” to Hillard Heintze’s review the following day, with Director of Communication’s Brian Smith finalizing a timeline and communications plan.
      • On January 9th, Hillard Heintze’s final report was linked in a bulletin released by the agency in which Garza highlighted several recommendations which the agency planned to implement:
        • “Revising the agency mission statement revision to reflect our ‘education’ role;
        • Revising the enforcement officer’s position description and the division’s policies and procedures to emphasize the importance of outreach and education as well as the approach with licensees in the officer’s work;
        • Revising our apparel and firearm policies to reflect our commitment to education;
        • Reorganizing the Director’s Office to include a unit that will focus on outreach and education to further education, understanding and compliance within the industries we regulate;
        • The Director’s Office will also centralize our policy and rules coordination so that agency decisions can be consistently and clearly articulated with agency and staff and the industry. We are creating a Legal/Policy Team that will be the central source of developing and conveying agency decisions;
        • Decisions will be maintained in a central repository that staff and licensees may use to have a reliable, consistent answer going forward;”